United Arab Emirates: Monetary, Banking & Financial Markets Developments 1st Quarter 2017

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1. United Arab Emirates Monetary , Banking & Financial Markets Developments 2017 – 1st Quarter Report May 2017
2. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Introduction As part of its commitment to promote economic and financial stability and growth in the UAE, the Central Bank of the UAE actively fosters a stable and efficient financial system by providing effective central banking services. The United Arab Emirates Monetary, Banking and Financial Markets Developments Report is one of the many avenues through which the Central Bank seeks to keep its stakeholders informed. This report discusses the monetary and banking activities as well as developments in the UAE financial markets during the first quarter of 2017, in comparison to the first quarter of the previous year. The report also reviews ratios of annual change over the period from March 2017 to March 2016. Monetary Developments Money Supply M1, which comprises Currency in Circulation outside Banks (Currency Issued - Cash at banks) plus Monetary Deposits, increased by 6.4% during the first quarter of 2017, compared to a 7.3% increase during the same period last year. On an annual basis, there was a 2.9% increase in the monetary aggregate M1, reaching AED 504.4 billion. Money Supply M2 (M1 plus Quasi Monetary Deposits (Resident Time and Savings Deposits in Dirham plus Resident Deposits in Foreign Currencies)), increased by 3.8% during the first quarter of 2017, compared to a 2.7% increase during the same period last year. On an annual basis, there was a 4.4% increase in Money Supply M2, reaching AED 1272.2 billion. Consequently, Money Supply M3 (M2 plus government deposits at banks and at the Central Bank) also increased by 3.9% during the first quarter of 2017 as compared to a 2.3% increase during the first quarter of 2016. On an annual basis, there was a 6.7% increase in Money Supply M3, reaching AED 1465.8 billion. Generally, the median money supply, M2, is considered the best indicator for the availability of liquidity in the economy, as it comprises currency in circulation outside banks, in addition to various deposits of all the resident sectors except the government sector in the UAE. Statistical data show that at the end of the first quarter of 2017, M2 increased relatively faster in comparison to its position at the end of the first quarter of 2016. The increase in M2 during the first quarter of 2017 was mainly due to an increase in non-government resident deposits by 3.7% reaching 1,206.8 billion, compared to a smaller increase of 2.5% (AED 1156.6 billion) during the same period of the previous year. CBUAE May 2017 Page 1
3. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table 1 - Monetary Developments in the UAE (In Billions Dirhams - End of Period) 2014 2015 2016 Fourth Quarter Fourth Quarter First Quarter Second Quarter 2017 Third Quarter Fourth Quarter* First Quarter* Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Amount Quarterly Change (%) Money Supply (M1) 436.1 1.2% 456.9 0.7% 490.3 7.3% 481.0 -1.9% 472.5 -1.8% 474.0 0.3% 504.4 6.4% Money Supply (M2) 1125.4 0.5% 1186.8 2.5% 1218.4 2.7% 1180.4 -3.1% 1200.2 1.7% 1225.5 2.1% 1272.2 3.8% Money Supply (M3) 1314.5 -0.9% 1342.8 1.6% 1373.8 2.3% 1364.8 -0.7% 1368.6 0.3% 1411.4 3.1% 1465.8 3.9% Amount Quarterly Change (%) Source- Data received from banks operating in the UAE M1 = Currency in Circulation Outside Banks (Currency Issued - Cash at banks) + Monetary Deposits M2 = M1 + Quasi-Monetary Deposits M3 = M2 + Government Deposits *Estimates, subject to revision CBUAE May 2017 Page 2
4. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Banking Sector Development 1- Banks Operating in the UAE The number of locally incorporated banks remains at 23 banks by the end of the first quarter of 2017, while their branches decreased from 874 at the end of the first quarter of 2016 to 834 at the end of the same period of 2017. The number of electronic services units of these banks decreased at the end of first quarter of 2017 to 35 from 39 at the end of March 2016. The number of Cash Offices decreased from 90 offices at the end of March 2016 to 72 offices at the end of March 2017. The number of GCC banks remains constant during the first quarter of 2017 at 6 banks, with 4 branches. The number of other foreign banks and their branches also remains unchanged at 20 banks and 81 branches at the end of the first quarter of 2017. The number of electronic services units of these banks decreased from 41 units at the end of March 2016 to 29 units at the end of March 2017. At the end of the first quarter of 2017, the number of financial institutions licensed by the Central Bank i.e., Wholesale Banks, Representative Offices, Finance Companies, Financial Investment Companies, Moneychangers and Offices for Intermediating in Currency Trading & Money Market Operations reached 11, 107, 28, 22, 141 and 11, respectively. The total number of ATM of banks operating in the UAE reached 5,211 by the end of March 2017, compared to 5,144 at the end of March 2016 (see table 2 for more details). CBUAE May 2017 Page 3
5. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table-2 Banks, Other Financial Institutions & ATMs 2013 - 2017 2013 2014 2015 Dec Dec Mar Jun Sep Dec 2016 Mar Jun 2017 Sep Dec* Mar* Locally Incorporated Banks Main Branches Additional Branches Electronic Banking Service Units Cash Offices 23 841 29 89 23 869 34 90 23 871 31 90 23 873 32 90 23 875 34 90 23 874 37 90 23 874 39 90 23 862 33 86 23 857 32 85 23 846 33 76 23 834 35 72 6 4 6 4 6 4 6 4 6 4 6 4 6 4 6 4 6 4 6 4 6 4 22 83 52 1 4 120 25 20 82 48 1 7 121 26 20 82 48 1 8 122 26 20 82 48 1 8 122 26 20 82 45 1 8 121 26 20 82 40 1 8 115 27 20 81 41 1 9 114 27 20 82 42 1 9 114 27 20 81 41 1 10 114 27 20 81 31 1 11 114 27 20 81 29 1 11 107 28 25 25 25 25 25 25 25 25 25 25 22 134 140 140 141 142 140 139 139 139 140 141 12 12 12 12 12 12 12 11 11 11 11 4,664 4,847 4,879 4,920 5,003 5,119 5,144 5,118 5,170 5,243 5,211 GCC Banks Main Branches Additional Branches Foreign Banks Main Branches Additional Branches Electronic Banking Service Units Cash Offices Wholesale Banks Representative Offices Finance Companies Financial Investment companies Moneychangers Offices for Intermediating in Currency Trading & Money Market Operations ATMs Source: Banking Supervision Department and UAESWITCH *Estimates, subject to revision CBUAE May 2017 Page 4
6. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] 2- Bank Assets and Loans At the end of the first quarter of 2017 total assets of banks operating in the UAE increased by 1.4%, reaching AED 2648.3, showing a faster growth than the 0.5% increase by the end of the first quarter of 2016. During the period between March 2016 and March 2017, the total assets of banks operating in the UAE increased by 6.3%. This hike was mainly brought about by 1.5% quarterly and 5.3% annual increase in credit, reaching AED 1597.2 billion by the end of March 2017. 3- Customer Deposits By the end of the first quarter of 2017, total deposits of resident and non-resident customers with banks operating in the UAE also increased by 2.5%, reaching AED 1602 billion, compared to AED 1502.6 billion at the end of the first quarter of 2016. Resident deposits increased by 3.6%, reaching AED 1413 billion at the end of the first quarter of 2017, compared to AED 1325.1 billion at the end of the first quarter of 2016 (1.9% quarterly increase). On the other hand, Non-resident deposits decreased by 5%, reaching AED 189 billion by the end of March 2017, compared to a 3.5% increase at the end of the same period of 2016. On an annual basis, Resident deposits and Non-resident deposits increased by 6.6% and 6.5%, respectively. 4- Capital and Reserves Aggregate Capital and Reserves of banks operating in the UAE decreased by 2.4%, falling to AED 338.7 billion at the end of the first quarter of 2017. However, this was a smaller reduction compared to a 2.5% decrease at the end of the same period of 2016. Compared to the first quarter of 2016, the total Capital Adequacy Ratios decreased slightly during the first quarter of 2017, however, remaining well above the 12% Capital Adequacy and 8% Tier1 ratios prescribed by the Central Bank regulations. Capital adequacy ratios measure the amount of a bank’s capital expressed as a percentage of its risk weighted credit exposures. A high capital adequacy ratio provides protection to depositors and promotes the stability and efficiency of the financial system of an economy. CBUAE May 2017 Page 5
7. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table- 3: Banking Indicators (End of Month, Figures in billions of Dirhams unless otherwise indicated) 2014 Dec 2015 Quarterly Change (%) Dec 2016 Quarterly Change (%) Mar Quarterly Change (%) Jun Quarterly Change (%) 2017 Sep Quarterly Change (%) Dec* Quarterly Change (%) Mar* Quarterly Change (%) 2304.9 -0.3% 2478.2 2.3% 2491.1 0.5% 2518.5 1.1% 2550.1 1.3% 2610.8 2.4% 2648.3 1.4% Banks’ Investments in Central Bank CDs 99.5 -15.8% 139.8 43.5% 115.4 -17.5% 109.1 -5.5% 103.8 -4.9% 108.2 4.2% 115.3 6.6% Shariah Compliant Certificates of Deposits 19.8 -24.4% 20.9 2.2% 27.1 29.7% 21.9 -19.2% 16.7 -23.7% 20.1 20.4% 26.3 30.8% 1378.1 -0.3% 1485.0 0.4% 1517.5 2.2% 1543.4 1.7% 1566.0 1.5% 1574.0 0.5% 1597.2 1.5% 299.8 -2.3% 330.7 0.3% 336.1 1.6% 341.9 1.7% 345.8 1.1% 348.2 0.7% 349.3 0.3% 1421.3 0.5% 1471.6 2.4% 1502.6 2.1% 1493.0 -0.6% 1508.7 1.1% 1562.9 3.6% 1602.0 2.5% 299.1 3.0% 324.8 3.1% 316.6 -2.5% 330.5 4.4% 339.4 2.7% 346.9 2.2% 338.7 -2.4% 18.2% -0.5% 18.3% 0.0% 18.0% -1.6% 18.4% 2.2% 18.6% 1.1% 19.0% 2.2% 18.6% -2.3% 16.2% -0.6% 16.6% 0.6% 16.3% -1.8% 16.8% 3.1% 16.9% 0.6% 17.3% 2.4% 16.9% -2.3% Total Assets Gross Credit (1) Personal Loans to Residents Total Deposits (2) Capital & Reserves (3) Capital Adequacy Ratio Tier-1 Ratio (1) Includes credit to residents and non-residents: loans to non-banking financial institutions, Trade Bills Discounted and Loans and Advances to the Government and Public Sector, Private sector (corporates and individuals) in local and foreign currencies. (2) Net of inter-bank deposits and bank drafts, including commercial prepayments. (3)Excluding subordinated borrowings/deposits, but including current year profit. CBUAE May 2017 Page 6
8. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] *Estimates, subject to revision 5- Foreign Assets of the Central Bank At the end of the first quarter of 2017, the Central Bank’s foreign assets increased by 4.5%, reaching AED 325 billion, compared to a 10.2% reduction at the end of the first quarter of 2016. This rise was mainly attributed to an increase in Current Account Balances & Deposits with banks abroad by 21% (an increase of AED 31billion), overshadowing reductions in Held-to-Maturity Foreign Securities by 5.9% (a reduction of AED 8.8 billion) and Other Foreign Assets by 58.7% (a reduction of AED 8.1 billion). 6- Values in Abu Dhabi and Dubai Financial Markets Abu Dhabi’s quarterly average Financial Market Index increased by 3% during the first quarter of 2017 compared to a 0.5% fall in the first quarter of 2016. The quarterly average Market Capitalization of companies listed at the Abu Dhabi Securities Exchange (ADX) increased by AED 6.3 billion reaching AED 467.4 billion at the end of the first quarter of 2017 compared to AED 4.2 billion increase at the end of the first quarter of 2016. Quarterly Trading Value increased significantly, rising from AED 14.8 billion (8.6% quarterly increase) during the first quarter of 2016 to AED 17.4 billion (53.7% quarterly increase) during the first quarter of 2017. Dubai’s quarterly average Financial Market Index also increased by 5.2% during the first quarter of 2017, compared to a 2.7% reduction during the same period in 2016. The quarterly average Market Capitalization of companies listed at the Dubai Financial Market (DFM) increased by AED 61.2 billion reaching AED 387 billion at the end of the first quarter of 2017 compared to AED 10.9 billion reduction at the end of the first quarter of 2016. Quarterly Trading Value increased comparatively slower, rising from AED 40.6 billion (112.4% quarterly increase) during the first quarter of 2016 to AED 48.2 billion (14.8% quarterly increase) during the first quarter of 2017. CBUAE May 2017 Page 7
9. 1st Quarter 2017 [UNITED ARAB EMIRATES MONETARY, BANKING & FINANCIAL MARKETS DEVELOPMENTS] Table 4: Abu Dhabi Securities Exchange (ADX) Indicators 2015 Mar Jun 2016 Sep Dec Mar Jun Sep 2017 Mar Dec Number of listed Companies 69 69 69 70 69 69 69 69 67 General Share Price Index** 4537.0 4632.7 4610.3 4288.6 4265.4 4430.5 4507.6 4385.1 4514.8 Quarterly Variation (%) -3.2% 2.1% -0.5% -7.0% -0.5% 3.9% 1.7% -2.7% 3.0% Market Capitalization (Billion AED)** 423.7 433.2 443.0 436.9 441.1 449.4 475.5 461.1 467.4 Quarterly Traded Values (Billion AED) 13.4 16.3 13.3 13.7 14.8 10.7 8.5 11.3 17.4 Source: Abu Dhabi Securities Exchange (ADX) Table 5: Dubai Financial Markets (DFM) Indicators 2015 Number of listed Companies* 59 59 59 60 60 60 60 61 2017 Mar 62 General Share Price Index** Quarterly Variation (%) 3684.5 - 4079.7 10.7% 3799.7 -6.9% 3286.3 -13.5% 3197.7 -2.7% 3372.2 5.5% 3487.7 3.4% 3408.1 -2.3% 3584.5 5.2% 331.7 38.2 366.2 65.2 360.4 28.9 323.3 19.1 312.4 40.6 332.4 28.9 337.0 21.7 325.8 42.0 387.0 48.2 Mar Market Capitalization (Billion AED)** Quarterly Traded Values (Billion AED) Jun 2016 Sep Dec Mar Jun Sep Dec *includes foreign companies Source: Dubai Financial Markets (DFM) **The Quarterly share Price Index and the Quarterly Market Capitalization are measured as the quarterly average of monthly observations. CBUAE May 2017 Page 8